I’m substituting for NLinStPaul this week, so don’t expect any miracles!
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There’s an interesting post up from this past Thursday, Letter from Langdon: I Got a Government Bailout by Richard Oswald.
Oswald talks about the farm he and his wife started after they first got married back in the the late 60’s. They were young and inexperienced, and it took a long time for them to find a lender who would help them start their new life together. Finally, after being turned down for loan after loan, they approached the Farmer’s Home Administration (FmHA):
Then we went to FmHA and talked to the administrator. He told us we were better off without the farm. On the last try to borrow the money, we went to a different ag lender who agreed to a 7-year intermediate-term loan with a flexible interest rate and a balloon payment due at the end of the seventh year. Since we used everything we had for a down payment, we also had to borrow money from the same lender to pay farm operating expenses.
Our repayment ability was limited to what the farm would earn. Back then, our projected annual income from the additional acres was only about $6000, the same amount as the payment. Before we finalized the loan I asked my loan officer what would happen if interest rates on the loan went up. He answered that he had never seen rates on this kind of loan fluctuate more than one half of one percent.
That was 1973. By 1975, the interest rate on our farm loan had risen 10% to 17.5%. The payment had doubled to $12000, and we were in a heap of trouble.
The Oswalds were on the verge of losing everything. They returned to the FmHA and were fortunate to meet administrator Coburn Jackson.
The next day when I went to his office, Coburn said he wouldn’t loan a dime on the farm, and never would… no matter what. To Coburn a mistake was a mistake. I had made a mistake buying that farm that he wouldn’t compound by getting involved. But he said he knew a long term lender who would take on the mortgage provided FmHA would furnish an operating loan. So that’s what he did. I got a long term mortgage back at the rate I first agreed to of 7.5%, while Coburn bailed me out with a loan that enabled us to pay off our other lender and keep on farming.
It’s amazing what a few thousand dollars at the right moment can do to help people keep on working and making a living.
Thus the “bailout.” Oswald goes on to explain how rural areas in the US should not be neglected in the rush to save our financial institutions and other big corporate entities.
With all the current talk of bailing out carmakers, investment banks and insurance companies, it’s worthwhile to note that for more than 60 years nearly all the financial aid farmers have received from FmHA, now FSA, has been mostly in the form of loans; Loans that are repaid with interest and backed by collateral in the form of land, equipment, crops, and livestock.
I recommend reading the whole post over at Daily Yonder, it talks about how the FmHA was formed in the 40s and the problems in rural America, how it has weathered recession and the diminishing number of young people who are willing to take a chance when it comes to starting a farm.
I am not always in agreement with the posts at Daily Yonder, but I find the view of the folks who blog there interesting and thought-provoking. It will be interesting to see what Obama will do when it comes to helping rural America. Oswald predicts former Iowa governor Tom Vilsack will become Secretary of the USDA – and puts forth a very informative and detailed analysis of both the Department and Vilsack’s qualifications.